The report, published on May 1, found that consumers will pay around $31.7 billion in extra interest charges over the next year due to the central bank’s 475 basis points in rate hikes between March 2022 and March 2023.
In addition, consumers are set to take a bigger hit to their pockets if the Fed raises interest rates by another 25 basis points on May 3, which it is widely expected to do.
Another interest-rate hike would bring the annual cost impact on consumers to $33.4 billion in total, according to WalletHub.
Other Interest Rates Impacts
For automobile loans, WalletHub’s analysts estimate the average APR on a 48-month new car loan to rise by around 12 basis points in the months following the Fed’s next 25 basis-point rate hike while little change will likely be seen in the annual percentage yield (APY) available from most deposit accounts.However, the report noted that this excludes online savings accounts, with WalletHub projecting a 14 basis-point increase in the average APY following the Fed’s March rate hike.
“Online savings account yields increased by an average of 267 basis points from January 2022 to March 2023, despite 475 basis points in Fed hikes during that period. Banks seem quick to pass higher rates to consumers on loans, but are not sharing the love on the deposit front,” the report noted.
The report comes after the Fed raised its benchmark rate a quarter percentage point, to a range of 4.75–5.0 percent—its highest level in 16 years—despite widespread economical volatility following the collapse of Silicon Valley Bank and Signature Bank.
First Republic Bank Collapses
The likelihood of a bump in the interest rate is in the cards despite the collapse of First Republic Bank, which had its assets seized by U.S. regulators over the weekend, marking the second-largest bank failure on record.“These actions are going to make sure that the banking system is safe and sound, and that includes protecting small businesses across the country who need to make payroll for workers and their small businesses,” Biden added.
Despite the administration’s reassurance regarding the banking sector, Americans are still concerned that another interest-rate hike by the Fed could further hamper their spending power and put their jobs at risk, according to the findings of a survey conducted by WalletHub between April 17 to April 21.
That survey found that 27 percent more Americans feel upset about the Fed raising interest rates again, compared to March, while nearly four times more Americans aged between 18–29 believe their job is at risk if the Fed continues to raise interest rates, compared to people who are at least 59 years old.